CHARTS: Here's how much currency is traded every day

If you’ve ever wondered just how much currency is traded on average each and every day, we have some good news. Thanks to HSBC, citing data from the Bank of International Settlements (BIS), we have the answer.

It’s $US5,100,000,000,000. That’s trillion with a “t”.

It’s a mind-boggling figure, but actually smaller than the $US5.4 trillion average seen three years earlier.

This chart from HSBC shows the evolution in average FX turnover levels, dating back to 1998. The data comes from the BIS’ triennial survey of the FX market and is based on volumes traded in April of this year.

HSBC notes that the decline in turnover was a result of a sharp drop in FX spot volumes, with the average daily volume falling to $US1.65 trillion this year, a 19% decrease from three years earlier, which stood at over $US2 trillion per day.

According to the BIS data, the fall in spot volumes was partially offset by an increase in FX swap volumes.

HSBC also cautions that recent strength in the US dollar “means that a non-USD FX transaction today appears smaller than the same transaction would have done in the 2013 survey”.

“This valuation effect has been quite significant – when volumes are measured in constant exchange rate terms, then total FX volume actually showed a 3.5% increase from 2013 to 2016,” it says.

In other words, if not for the US dollar being stronger, FX volumes actually increased from three years earlier.

Here’s a couple of charts from HSBC showing the most actively traded currencies worldwide in April. As the world’s reserve currency, the US dollar clearly dominates, accounting for nearly 88% of total turnover.

And here’s the same chart, excluding the US dollar. The share of FX turnover of the Chinese renminbi has clearly grown, coming at the expense of the euro, yen and Australian dollar.

“The dominant position of the USD is, at least partly, a result of the USD being a hub currency”, says HSBC.

“Whilst it is possible to quote a price in any currency pair, in the interbank market (which is the ultimate generator of FX liquidity) most currencies are only tradable against a small number of other currencies – most commonly the USD.

“This means that when customers deal with a bank in a non-USD cross-rate, the transaction is likely to be split into two USD-based legs by the market-making bank,” it adds.